A quarter of young people making Buy Now Pay Later repayments haven’t been able to pay for food, rent or bills as a result, Citizens Advice has found.
New research from Citizens Advice shows 45% of 18 to 34-year-olds in the UK have used Buy Now Pay Later in the last 12 months. Alarmingly, half of these did it without realising and one in three went on to regret it.
Buy Now Pay Later is often advertised at online checkouts as an easy way of splitting or delaying payments on items such as clothing or electronics, with incentives like it being ‘interest-free’. But Citizens Advice fears for many people it can be a slippery slope into debt.
Overall, 27% of UK adults have used these firms in the last 12 months, rising to 37% of disabled people and 45% of people with a mental health problem.
The average person was repaying £63 a month. But Citizens Advice found almost two in five (5.7 million) who’ve used Buy Now Pay Later in the last year didn’t think it was ‘proper borrowing’ and six million didn’t fully understand what they were signing up for.
The charity is warning that four in 10 of those who’ve used Buy Now Pay Later in the last 12 months are struggling to repay. It found a quarter of consumers regretted paying using these platforms, with the most common reasons being spending more than they can afford, and paying more than they expected.
And repayments are not the only problem, with three in 10 Buy Now Pay Later users saying they’ve been charged a fee they didn’t expect.
In a separate survey of 280 of the charity’s frontline advisers, more than a fifth said they had advised or were aware of people with Buy Now Pay Later issues, with just over two-fifths of these seeing an increase since the start of the pandemic.
‘I’ve been barraged with calls, emails, and letters from a debt collector – all for buying some clothes online’
One client bought £600 worth of clothes and used a Buy Now Pay Later firm to pay in installments. They didn’t receive the goods and so cancelled their payment to the firm while they waited for the issue to be resolved by the retailer.
“The whole thing has been so stressful. I’m constantly on edge. I’ve just been barraged with calls, emails, and letters from a debt collector – all for buying some clothes online.
“The firm said they were referring me on to someone and I had no idea it was a debt collector. I had no idea that Buy Now Pay Later could impact my credit score.
“I’ve never had issues shopping this way before. But this time it’s like as soon as something went wrong they’ve washed their hands of me.”
Citizens Advice believes Buy Now Pay Later firms must overhaul their checkout processes, to ensure shoppers aren’t encouraged to spend more than they can afford, and improve affordability checks. Customers must also be treated fairly if they are struggling to repay and be able to escalate problems to the Financial Ombudsman Service.
The charity will share its research with the Financial Conduct Authority, as it decides how Buy Now Pay Later firms will be regulated.
Nicky Willshere, Chief Officer at Citizens Advice Ipswich, said:
“Buy Now Pay Later borrowing can be like quicksand – easy to unwittingly slip into and much more difficult to get out of.
“It shouldn’t be possible for people to sign up for credit without realising, and the fact this is happening so often signals that a drastic overhaul is needed.
“This industry more than trebled in 2020, and while these products work for many shoppers, the regulator has rightly recognised the potential for harm. It must ensure robust consumer protection keeps pace with changes in how we shop.”